OECD Pilot Project On Responsible Agricultural Supply Chains In .
Responsible business conduct OECD Pilot Project on Responsible Agricultural Supply Chains in Southeast Asia BASELINE REPORT
OECD Pilot Project on Responsible Agricultural Supply Chains in Southeast Asia BASELINE REPORT
Please cite this publication as: OECD (2020), OECD Pilot Project on Responsible Agricultural Supply Chains in Southeast Asia: Baseline Report With funding by the European Union This document is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. The document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. OECD 2020 2
Foreword The OECD is engaged in promoting the understanding and uptake in Southeast Asia of supply chain due diligence recommendations in the OECD-FAO Guidance for Responsible Agricultural Supply Chains. This report presents the findings of a baseline survey conducted amongst companies along agricultural and seafood supply chains to understand how they are implementing responsible business practices and in particular risk-based due diligence across agricultural supply chains. The survey was shared with agribusiness companies in the region beyond the pilot participants to capture broader trends of responsible business conduct in Southeast Asia. Twenty-eight companies, including twenty-three pilot participants, completed the survey. This report was prepared by Dr Alison Watson working as a consultant for the OECD Centre on Responsible Business Conduct. It was undertaken within the framework of the ILO-EU-OECD “Responsible Supply Chains in Asia” programme with funding by the EU. 3
About the OECD-FAO Guidance Responsible Agricultural Supply Chains The OECD-FAO Guidance for Responsible Agricultural Supply Chains (the OECD-FAO Guidance) provides a common framework and globally applicable benchmark for the application of responsible business practices in agricultural supply chains. It is based on and incorporates various long-standing standards for responsible business conduct (RBC), such as the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines), the UN Guiding Principles on Business and Human Rights (UNGPs), the International Labour Organisation Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (ILO MNE Declaration), and the UN Committee on World Food Security’s Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI). The OECD-FAO Guidance targets domestic and international, small, medium and large enterprises across the entire agricultural value chain, from the farm to the consumer. Find out more at ply-chains.htm About the Responsible Supply Chains in Asia programme A partnership between the European Union (EU), the International Labour Organization (ILO) and the OECD, with funding by the EU, the programme works with partners in Asia to promote respect for human rights, including labour rights, and responsible business standards in global supply chains. The three-year programme (2018-2020), carried out in collaboration with Japan, China, Myanmar, Philippines, Thailand and Viet Nam, has two broad objectives to promote smart, sustainable and inclusive growth by ensuring that investors and businesses have a better understanding of corporate social responsibility; and to create policy environments conducive to promoting RBC and increased opportunities for dialogue. Under this programme, the OECD implements a pilot project with companies in Myanmar, Philippines, Thailand and Viet Nam to understand how application of international recommendations and standards in supply chain due diligence can help strengthen management practices, promote responsible agricultural supply chains and support business contribution to achieving the Sustainable Development Goals (SDGs). Find out more at -Chains-in-Southeast-Asia.pdf 4
Table of Contents Executive Summary . 7 Section I. Background . 9 The OECD-FAO Guidance for Responsible Agricultural Supply Chains .9 The OECD Pilot on Responsible Agricultural Supply Chains in Southeast Asia .10 SEA Pilot Project approach .10 Section II. Survey Approach and Methodology . 12 Section III. Survey Results . 14 Respondents profile .14 Step 1: Establish strong enterprise management systems for responsible supply chains .18 Key findings . 18 Adoption and integration of RBC policies . 18 Consideration of international standards and guidance . 23 Internal management structure and support for RBC implementation. 24 Engagement with business partners . 25 Establish an operational-level grievance mechanism . 27 Step 2. Identify, assess and prioritise risks in the supply chain .28 Key findings . 28 Mapping the supply chain . 28 Enhanced due diligence. 29 Step 3. Design and implement a strategy to respond to identified risks in the supply chain .31 Key findings . 31 Integration of risk into management plan . 31 Reporting findings of risk assessment and management to senior management . 31 Adopting a risk management plan . 32 Consultation with stakeholder when developing and implementing risk management plans . 33 Step 4. Verify supply chain due diligence .34 Key findings . 34 Verification of supply chain due diligence. 34 Challenges in the implementation of verification measures . 37 5
Step 5. Report on supply chain due diligence .39 Key findings . 39 Public reporting . 39 Section IV. Recommendations . 42 Annex I. . 45 Baseline survey .45 Definitions .59 6
Executive Summary This baseline assessment carried out as part of the OECD Pilot Project on Responsible Agricultural Supply Chains in Southeast Asia1 (SEA Pilot) provides an overview of how certain agribusiness companies operating in Southeast Asia are currently implementing the recommendations of the OECD-FAO Guidance for Responsible Agricultural Supply Chains2 (OECD-FAO Guidance). Companies who participated in this survey represent a diverse group of Southeast Asian agribusiness companies operating across the supply chain, with 82% of companies involved in cross-border trade. This diversity in size, focus, and scope of operations across agricultural supply chains provides valuable insight into the challenges and opportunities for improving responsible business conduct (RBC) and supply chain due diligence. Companies’ policies and actions were assessed against the five-step framework for risk-based due diligence set out in the OECD-FAO Guidance. Potential gaps and opportunities for improving implementation of riskbased due diligence were identified, along with key findings and recommendations. The following seven overarching points set out the main conclusions of the report which are recommended for further consideration in the work of the SEA Pilot, and for in-depth discussions amongst pilot participants. 1. Companies are interested and motivated to improve responsible business policy and action. This is particularly so within the immediate boundaries of company operations and with Tier 1 business partners. Some companies are also engaged with suppliers beyond Tier 1 relationships and have invested in the development, and implementation of comprehensive policy related to RBC, which is regularly verified. Others, however, are at the very start of developing policies and processes across their operations and supply chains. A ‘learning by doing’ approach, as well as sharing of experiences across the sector should be further encouraged and supported. 2. Few companies demonstrate development of comprehensive written policy across all relevant areas of responsible business. Companies could improve risk-based due diligence efforts by using the model enterprise policy contained in the OECD-FAO Guidance as a template to identify potential policy gaps, with the goal to develop written policy for RBC, appropriate to their own needs and particular risk profile. Examples of written or model policies that have been implemented by companies with more advanced RBC programmes should be shared as a valuable resource to help other companies develop or refine strategy. 3. The use of, or reference to, international and regional guidance, frameworks and standards, is low. Despite the many international frameworks on responsible agricultural practices available (e.g. the UN Committee on World Food Security’s Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI), the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security (VGGT), and the OECD-FAO Guidance for Responsible Agricultural 1 The SEA Pilot is part of the ILO-EU-OECD “Responsible Supply Chains in Asia” programme with funding by the EU. The SEA Pilot works with 23 of these companies with operations in Myanmar, the Philippines, Thailand and Viet Nam in line with the target countries and sectors in the programme. -Chains-in-Southeast-Asia.pdf 2 ply-chains.htm 7
Supply Chains), there is a low awareness of these instruments and consequently a low level of these instruments being referenced in company policies. It is valuable to understand why many companies are not using or referring to such guidance. Discussion on ways to better integrate and increase awareness of these resources would be useful. 4. Adoption of an RBC policy requires buy-in from internal and external stakeholders and this can be a complex process. Obtaining buy-in for the adoption of policy can be challenging and requires the support of both internal and external stakeholders. Case examples of actual adoption of responsible business policy would be useful. In particular, there is a need to share success stories regarding the implementation of activities upstream in the supply chain. It is also important to share experiences that have not worked well, as such learnings give extremely useful insight into future approaches. 5. The implementation of RBC policy on cross-cutting standards is lower than implementation of policy on issue-specific standards. Companies tend to focus responsible business efforts on issue-specific standards (e.g. Labour rights or Environmental issues) compared to the cross-cutting standards (e.g. Benefit sharing) listed under the model enterprise policy.3 Cross-cutting standards are, however, crucial to enabling responsible business across all areas of company operations. Developing a deeper understanding of the ways that cross-cutting standards can enhance overall business performance, including performance on issue-specific standards, could promote their implementation. The development of policy on Grievance mechanisms is one example identified where the development of policy would reinforce efforts towards improved risk-based due diligence across other standards such as Human rights. 6. Management systems to implement RBC and the use of verification processes in partnership with external stakeholders is less developed. Robust management systems to support implementation of supply chain diligence is critical. Results indicated a need for some companies to better clarify roles and responsibilities across the company on RBC implementation. The implementation of management systems to implement RBC in partnership with external stakeholders is less developed in many companies. These can include measures like contractual terms in commercial agreements, requesting information from suppliers on their RBC policy and practices, running supplier training sessions, and providing incentives (e.g. long-term supplier contracts, financial bonus). A focus on strengthening verification processes to help measure company performance is also needed. Examples and case-studies of measures and verification processes that support RBC implementation across the supply chain would therefore be helpful for companies to learn from, and adapt to their own circumstances. 7. Public reporting and communication of due diligence policy is a challenge for many companies. Companies use a diversity of approaches to communicate responsible business action, yet many companies do not currently report publicly. Further discussion on the need for public communication of responsible business policy and action, as well as on what, when, to whom, how, and why to communicate such information, would be beneficial. Examples of how various companies communicate to different stakeholders across the supply chain on responsible business policy could be useful tools in themselves for other companies to learn from, and adapt for their own needs. 3 The model enterprise policy consists of nine issue-specific standards (Human rights, Labour rights, Health and safety, Food security and nutrition, Tenure rights over and access to natural resources, Animal welfare, Environmental protection and sustainable use of natural resources, Governance, Technology and innovation) and six cross-cutting standards (Impact assessment, Disclosure, Consultations, Benefit sharing, Grievance mechanisms, Gender). 8
Section I. Background The OECD-FAO Guidance for Responsible Agricultural Supply Chains In 2016, the OECD and Food and Agriculture Organization of the United Nations (FAO), with the support of a multi-stakeholder advisory group, developed the OECD-FAO Guidance for Responsible Agricultural Supply Chains (the OECD-FAO Guidance). The OECD-FAO Guidance provides a common framework on due diligence and benchmark for the implementation of responsible business practices across agricultural supply chains globally. The OECD-FAO Guidance incorporates a number of long-standing standards for responsible business conduct (RBC), including the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines), the UN Committee on World Food Security’s Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI), the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security of the Committee on World Food Security (VGGT), the UN Guiding Principles on Business and Human Rights (UNGPs) and the International Labour Organisation Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (ILO MNE Declaration). It also provides a five-step risk management framework to help companies operationalise these high-level normative expectations into day-to-day business management systems and operations. It provides a flexible and practical approach which can be tailored to companies’ position in the supply chain, context and location of operations, as well as size and capacity. The OECD-FAO Guidance is structured around: 1. A model enterprise policy outlining the RBC standards that enterprises should observe to build responsible agricultural supply chains. These include issue-specific standards and cross-cutting RBC standards and are illustrated in Figure 1. 2. A five-step framework for risk-based due diligence which recommends that companies: Step 1: Establish strong enterprise management systems for responsible agricultural supply chains Step 2: Identify, assess and prioritise risks in the supply chain Step 3: Design and implement a strategy to respond to identified risks Step 4: Verify supply chain due diligence Step 5: Report on supply chain due diligence 3. Annexes that set out recommended measures for risk mitigation and prevention along agricultural supply chains and guidance on engagement with indigenous peoples to obtain their free prior and informed consent (FPIC). 9
Human rights Technology and innovation Governance Labour rights 5. Report on supply chain due diligence Cross-cutting standards Impact assessment, Disclosure, Consultations, Benefit-sharing, Grievance mechanisms, Gender Environmental protection and sustainable use of natural resources 1. Establish strong company management systems Health and safety 4. Verify supply chain due diligence 2. Identify, assess and prioritise risks in the supply chain Food security and nutrition Animal welfare Tenure rights over and access to natural resources Model enterprise policy for responsible agricultural supply chains 3. Design and implement a strategy to respond to identified risks Five-step framework for risk-based due diligence Figure 1: Two major components of the OECD-FAO Guidance for Responsible Agricultural Supply Chains The OECD Pilot on Responsible Agricultural Supply Chains in Southeast Asia The OECD Pilot on Responsible Agricultural Supply Chains in Southeast Asia (“SEA Pilot”) was launched in mid-2019 to promote awareness of the OECD-FAO Guidance in the region, and to increase knowledge on how agri-businesses can implement risk-based due diligence across the supply chain to meet international RBC expectations. With the support of governments, business and civil society among others, the OECD and the consultant broadly informed companies in the region about this unique opportunity, including during the Responsible Business and Human Rights Forum in June 2019 in Thailand. The Forum took place during Bangkok Business and Human Rights Week and was co-organised by the Royal Thai Government, OECD, United Nations Development Programme (UNDP), United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), ILO and with the participation of the UN Working Group on Business and Human Rights. The SEA Pilot is not an evaluation or audit of participants’ existing due diligence practices. Rather, it aims to support participants to collectively identify potential gaps and opportunities to strengthen their approach to risk-based due diligence and promote good practices and learnings for implementing the OECD-FAO Guidance and related international standards for RBC in agricultural supply chains. The SEA Pilot promotes ‘learning by doing’ and encourages communication among supply chain actors to advance responsible business actions. SEA Pilot Project approach Twenty-three companies are currently participating in the SEA Pilot. Pilot participants are companies operating in Myanmar, Philippines, Singapore, Thailand and Viet Nam. The Pilot remains open to new members and interested companies operating in the region should contact the OECD Secretariat. 10
Participants include agribusiness companies across the supply chain and reflect a very diverse group of companies in terms of company size, focus of operations, commodities and services, as well as level of RBC knowledge and maturity. More detail on the profile of pilot participants can be found in Section III of this report. The SEA Pilot consists of three major components: 1. Baseline survey The first component is the completion of a baseline survey by agribusiness companies. The survey evaluates existing responsible business practices across companies in comparison to the recommendations of the OECD-FAO Guidance. Company representatives were also invited to participate in a brief interview to provide further explanation on their practices. The survey was open to all companies in the region who wanted to participate, hence the results from the baseline survey indicate a response beyond the SEA Pilot participants. A total of 28 companies participated in the survey. 2. Peer-learning In 2020, companies in the SEA Pilot will have the opportunity to participate in a series of peer-learning webinars to address gaps identified through the baseline analysis. The webinar sessions will explore challenges and opportunities for improving responsible business in the region. Companies will have the opportunity to engage with subject-matter experts, discuss successes and challenges with peers, share learnings, test their approach to addressing critical social and environmental impacts with others and incorporate feedback to strengthen their management systems, approaches and decisions. 3. Final survey and recommendations A final survey will be undertaken towards the end of 2020 to capture pilot participants’ learnings, as well feedback on the Pilot. It will also identify areas for resource development to aid companies in future RBC efforts. Key takeaways from the SEA Pilot will be highlighted with a final report published at the end of 2020. 11
Section II. Survey Approach and Methodology Structure of the baseline survey The aim of the baseline survey is to assess how enterprises in Southeast Asia are implementing the recommendations of the OECD-FAO Guidance and identify potential gaps and opportunities for improvement in risk-based due diligence. 28 companies completed the survey. The survey responses from governments, research institutions, civil society and international organisations have been noted and will feed into wider activities, such as the peer learning webinars. However these responses were not considered in the analysis given the aim of the baseline survey above. The baseline survey (Annex 1) comprised of six sections consisting of 31 multiple-choice, Likert and openended style questions as summarised in Table 1. Section Introduction Definitions General Policy development and communication Risk assessment and due diligence Next steps Description Purpose of the survey, key dates and confidentiality provisions. Key definitions. General information about each company, including name, geographical scope, size and operational focus of activities managed. Questions related to implementation of Steps 1 and 5 of the fivestep framework for risk-based due diligence Questions related to implementation of Steps 2, 3 and 4 of the fivestep framework for risk-based due diligence. Questions related to participation in the SEA Pilot. Table 1: Structure of the baseline survey One-on-one Interviews Companies participating in the survey were invited to share further information in a brief 25-minute interview with the consultant. A total of 7 companies participated in these one on one interviews. Organisation The survey was open for approximately six weeks from 6 September 2019 using the SurveyMonkey tool. Invitations to complete the survey were sent to all pilot participants, along with other OECD agribusiness industry and sector contacts in the region. An explanatory webinar session was offered on 10 September 2019. Additional sessions with the consultant were also undertaken with companies to clarify any aspects. Invitations for interviews were sent to all pilot participants and companies who indicated interest in participating in such sessions. Data Quantitative and qualitative data was collected. Quantitative information provided by survey participants was used to analyse key trends, issues and present data on participants’ approach to supply chain due diligence. Qualitative data supplied by respondents provided additional detail of existing practices, tools and approaches adopted by companies. All information provided by participants has been anonymised and analysed in aggregate form. Survey results presented in this report are therefore not attributed to any individual respondent or their company. 12
However, anonymous quotes taken from interview sessions and responses to survey questions have been used to provide further detail of company perspectives. Limitations The survey provides a ‘snapshot’ of current implementation and perceptions of responsible business policy and action of a selection of (28) agribusiness companies operating in Southeast Asia. It does not represent a comprehensive study as the sample size is small and focuses only on the response of companies who selfselected to participate in the survey. Quantitative data may, therefore, not always be statistically significant. Efforts were made to address possible areas of survey ambiguity. For example, one page of the survey was devoted to key definitions with explanatory links to help secure a common understanding of terms used. The presence of policy was also deliberately asked in such a manner as to help differentiate efforts on policy development between full written policy, partial policy, no policy and not applicable. Where possible, interview sessions were also used to clarify any responses on the survey. The results, however, cannot provide any conclusions on actual levels of implementation of responsible business practice within companies. It is also important to stress that no judgment on the quality of policy is undertaken and no verification or assessment of the accuracy of any responses has been undertaken. At this level, the survey is primarily interested in whether policy is present or not, and to help identify potential gaps and opportunities generally across companies. The sample is also diverse, representing companies of all sizes, from on-farm enterprises to global fastmoving consumer goods (FMCG) brands. This diversity can also be viewed positively as it introduces a variety of different perspectives on how to implement and improve responsible business across the supply chain. It does limit, the comparability of data that would be possible, for example, if multiple companies of similar size or at the same stages of the supply chain were participating. This offers an opportunity for further targeted research. 13
Section III. Survey Results Section III presents the results of the baseline survey. The results are analysed against the five-step framework for risk-based due diligence as detailed in the OECD-FAO Guidance. Respondents profile Respondents are primarily senior-level experienced managers 89% of respondents held a senior position in the company. For example, manager level (39% of respondents) and senior director level (29%) reporting directly to a corporate executive leader or corporate-level executive. 21% of respondents represented individuals at corporate executive-level (e.g. CEO, CIO, CFO). This demonstrates a high level of engagement from senior leaders in companies that took part in the survey. The geographical scope of company operations is mostly global 68% of respondents describe the geographical scope of the company they w
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